Cost of Doing Business in Georgia Soars Amid Higher Inflation, Taxes, Committee Hears

Committee chairman Rep. Jason Smith (R-Mo.) arrives for a House Ways and Means Committee hearing on Capitol Hill in Washington on March 10, 2023. Drew Angerer/Getty Images

The cost of doing business in Georgia has risen exponentially as the effects of rising inflation, higher taxes, and increasing interest rates affect operations, the U.S. House Ways and Means Committee heard during a field hearing in Peachtree, Georgia.

“Historic inflation, higher interest rates, and help wanted signs have come to define life and America for millions of people and businesses,” committee Chairman Jason Smith (R-Mo.) said in his opening remarks.

Small companies, which employ about 43 percent of workers in the state, are “battling on the front lines of the Biden economy for the past two years” and have felt like Washington has forgotten about their daily issues, Smith said. A proposed $4.7 trillion in new taxes is leaving families, small businesses, and farmers “who build feed, fuel, and power our nation” feeling like they aren’t being prioritized by Congress.

The roughly 1.2 million small businesses are just some of the ones struggling in this environment, he said. In addition, working-class households have lost an estimated $10,000 over two years because of higher prices, while inflation-adjusted wages have been negative for the same time period.

What Are Georgia Businesses Experiencing?

Georgia’s trucking industry, a sizable contributor to the state economy, has battled rising fuel prices. A gallon of gasoline is up more than 50 percent since January 2021, climbing to an average price of $3.37, American Automobile Association (AAA) numbers show. Diesel has also surged, topping $4.07 a gallon.

Local restaurants have contended with surging food prices and a need for more labor, weighing on the typical mom-and-pop businesses’ already thin margins and high operating costs.

Matt Livingston, the owner of Coach’s Bar and Grill, told the panel that his food costs have surged as high as 40 percent, forcing his restaurant to routinely “change our menu prices just to keep our head above water.”

That struggle is coupled with the industrywide problem of staff shortages—or that people arrive late for work, if they show up at all. As a result, turnover rates are high, training new employees is expensive, and staff quit because “they can make more staying at home.”

“There’s no concept of an honest day’s work for an honest day’s pay,” he said.

Georgia ranks second in the country among states where employers are struggling to hire, right behind Alaska and ahead of West Virginia, according to WalletHub data in March.  Still, employment levels climbed nearly 3 percent year-over-year last month, adding more than 133,000 jobs since March 2022,  according to the Bureau of Labor Statistics.

Another crucial issue is that lending costs have spiked for businesses and consumers, says Lisa Winton, the CEO of Winton Machine Co. She says her business has sought to expand its facility size, but “the cost of doing so has risen fourfold over the last several years.”

Over the past year, the Federal Reserve has boosted interest rates to their highest level since the global financial crisis 15 years ago, as the central bank tries to reduce its target inflation rate to 2 percent. In addition, the banking turmoil last month has led to a tightening of lending conditions.

The exterior of the Marriner S. Eccles Federal Reserve Board building is seen in Washington on June 14, 2022. Sarah Silbiger/Reuters

Both developments have made borrowing more expensive and credit access more challenging for many industries.

The Atlanta Fed Bank noted in the central bank’s monthly Beige Book that manufacturers in the Peach State have “reported significant slowing activity.”

It isn’t only interest rates affecting Winton’s operations. The tax code and various upcoming adjustments could make it “harder to do business in America.” A couple of these adjustments include changing the maximum deduction for interest on business loans and phasing out the full expense of capital investment of bonus depreciation.

“Both of these changes are like attacks on manufacturing growth,” Winton told lawmakers. “That’s because manufacturing requires hard work, skilled workforce creativity, and machinery.

“I am very concerned that these changes will force our customers to keep using older pieces of equipment rather than purchasing newer or additional ones, or they will buy cheaper equipment from Asia or move more production offshore.”

Rachel Shanklin, the Georgia director and National Women’s Entrepreneurship director for Small Business Majority, urged the federal government to build upon many of the programs and benefits created in the CARES Act, the American Rescue Plan, and the Inflation Reduction Act. She listed the extension of the premium subsidies in the Affordable Care Act through 2025 as one example of the government helping entrepreneurs, small business employees, and Georgia’s economy.

“Small businesses need a modernized and robust benefits infrastructure that promotes wealth creation, financial security, and quality jobs,” she said. “These policies are clear examples of programs that are essential to supporting small businesses and helping them compete with larger businesses. We encourage policymakers to consider policies that will empower entrepreneurs to build a thriving and equitable economy.”

Despite the myriad of challenges facing the small business community, Gov. Brian Kemp recently touted the state’s economy in a speech to the Cobb Chamber of Commerce, citing its AAA credit rating, $6 billion budget surplus, and close to $2 billion in household tax rebates and relief.

“Just like the [Atlanta] Braves, Georgia’s economy continues to win as well,” he said.